Somers says state should keep giving cities support

Republican lieutenant governor candidate Heather Somers said Wednesday that the state program that helped to grow her Willimantic company, Hydrofera LLC, more than a decade ago is exactly the kind of support that the state should continue to provide to Connecticut's depressed cities.

"These kinds of investments in those types of cities is exactly what we have to do to change the course of our cities," said Somers, in an editorial board meeting at The Day where she defended the state's investment in Hydrofera and her profit when the company was sold in 2012.

At issue was the state's equity stake in Hydrofera - $1 million invested in 2001 - and the $475,000 it collected when the company was sold two years ago.

Somers has been criticized for not disclosing what she made on the deal, amid speculation that she and her partners got the better advantage in the transaction.

But Somers flatly denied that Wednesday, saying she put 18 years into the company and was paid $100,000 upfront when Hydrofera was sold to Hollister Inc. of Libertyville, Ill., two years ago. She is collecting another $100,000 in payments over four years, she said.

When Hydrofera approached the state looking for a loan to grow its business around 2001, the state Community Development Authority offered to invest in the business instead. The state offered $1.5 million, but Hydrofera agreed to take just $1 million in two $500,000 allotments, one to support its medical technology unit and another for its semiconductor business. In return, the state got an equity stake in each company.

Somers and two partners had started the business in 1997, and she said a few years later, when they approached the state, it was because they needed an infusion of cash for the company to grow. The partners purposely avoided looking to a venture capitalist, Somers said, because they wanted to keep the business in the state and feared a venture capitalist would move it to the South.

Today, Hydrofera employs 43 people in Willimantic and pays about $200,000 annually in rent, Somers said. Under terms of the 2012 sales contract to Hollister, Somers said, the new owners agreed to keep the company in the state for at least four years.

While Somers did not disclose the sales price of the company, she did say that the state development authority (now Connecticut Innovations) signed off on the agreement. At the time of the sale, the state recouped its 3.8 percent stake, or $475,000, in the medical technology portion of the company. In addition to the $475,000, Somers said the state was paid a $10,000 penalty since only 43 of 100 promised jobs were created. The goal of 100 was set when the state invested.

The semiconductor business failed to prosper, and all the investors, including the state, took a loss on that deal. But the medical product, a dressing for wounds called Hydrofera Blue, has been successful and Hollister is continuing that product.

Because Hydrofera's patent on the wound dressing is close to expiring, the value of the investments has dropped. But Somers said the state prospered in all kinds of ways since investing in Hydrofera. In addition to the jobs created and the benefits of spending by those employees, the firm has paid considerable taxes and rent, and has hired other businesses or bought services leading to growth in the state and local economies.

Somers said it would not be up to her in the role of lieutenant governor to continue the Connecticut Innovations program that helped Hydrofera to prosper and grow, but that she personally supports it and would advocate for similar programs.

"Something like this that helps small businesses to create good, highly skilled jobs ... it's what we need to turn our cities around," she said.

Somers, a Groton town councilor who is now the running mate of Republican gubernatorial candidate Tom Foley, said she does not support multi-million-dollar grants or loans to highly capitalized firms like those that have benefited through incumbent Democratic Gov. Dannel P. Malloy's First Five program.

Foley agrees.

On Aug. 14, at a joint press appearance for Foley and Somers, Foley was asked whether he considered the state investment in Hydrofera to hurt the credibility of his criticism of the Malloy administration's "affinity for corporate welfare."

"I don't think so," said Foley. "I'm not against incentives for businesses that are properly conceived and administered. Many of the incentive programs the government has offered, long before Gov. Malloy, I support. But the First Five program and what I call corporate welfare is when you are merely bribing businesses to stay here who are being driven out because you are anti-business, that I'm against."

Somers, who initially worked in medical sales and later moved to the product development side of the business, said Hydrofera Blue has saved lives and been heartily welcomed by the medical community.

"This is the one thing in my life that I am super proud of," she said, adding that success for her is not about money.

She remarked that she's been involved in Groton politics for 11 years as mayor and a councilor, without any compensation at all.

"This is not about fancy titles or big financial gains," she said.

The state audited Hydrofera in all the years it had an equity stake in the company and was a partner at the table when Hydrofera was sold, said Somers. And, she added, the state has called the firm and its investment in it a success.